2021 (12) TMI 1066 - AT - Income Tax

Estimation of income - the appellant is a entry provider and not making actual sales/purchase and earns nominal income by way of commission on issuing bills to parties @ 0.29% to 0.50% - HELD THAT - As contention raised by the assessee that order passed by the AO in assessee s own case in succeeding years i.e. AYs 2014-15 2015-16 vide order dated 28.12.2016 28.12.2017 respectively is applicable to the year under consideration by applying the rate of 0.5% of the total billing is not sustainable because in AYs 2014-15 2015-16 there was not even a whisper if assessee had ever entered into the business of providing accommodation entries to the dealers to help them to reduce their tax liabilities rather in those years it was simple case of dealing into wholesale business of trading in which Revenue itself had accepted 0.5% ratio on total billing to assessed income of the assessee. We are of the considered view that on the basis of succeeding years orders having distinguishing facts assessee s income cannot be estimated by applying the same ratio i.e. 0.5% - CIT(A) has rightly thrashed the issue in the light of the facts and circumstances of the case and prevailing general practices in the identical trade. Finding no illegality or perversity in the impugned order passed by the ld. CIT (A) appeal filed by the assessee is hereby dismissed.

Summary

Issues Involved:
1. Estimation of income based on accommodation entries provided by the assessee.
2. Comparison of income estimation in the current year with previous assessment years.
3. Challenge to the order passed by the Commissioner of Income-tax (Appeals).

Issue 1: Estimation of Income Based on Accommodation Entries:
The case involved the assessment of the appellant, who was alleged to be an entry operator providing accommodation entries to inflate expenses for certain firms. The Assessing Officer (AO) estimated the total income of the assessee at ?1,07,76,050 @ 10% of the entries provided. The Commissioner of Income-tax (Appeals) calculated the income at 3% of the turnover, resulting in ?28,86,745. The appellant had agreed to providing accommodation entries to reduce tax liabilities. The Tribunal upheld the CIT (A)'s decision, considering the prevailing practices in the trade and the nature of entries provided by the assessee.

Issue 2: Comparison with Previous Assessment Years:
The appellant argued that in the succeeding assessment years 2014-15 & 2015-16, the Revenue itself estimated the commission income at 0.5%, which was different from the 3% estimation in the current year. However, the Tribunal noted that in those years, the nature of the appellant's business was different, and there was no evidence of providing accommodation entries. Therefore, the Tribunal held that the income estimation for the current year could not be based on the ratio applied in the succeeding years.

Issue 3: Challenge to the Order of the Commissioner of Income-tax (Appeals):
The appellant challenged the order of the Commissioner of Income-tax (Appeals) on the grounds that the estimation of income was not based on facts but on assumptions. The Tribunal examined the facts presented by both parties and concluded that the CIT (A) had reasonably estimated the income at 3% of the turnover, considering the nature of the business and prevailing practices in the trade. The Tribunal dismissed the appeal, finding no illegality or perversity in the CIT (A)'s order.

In summary, the judgment addressed the estimation of income based on accommodation entries, the comparison with previous assessment years, and the challenge to the order passed by the Commissioner of Income-tax (Appeals). The Tribunal upheld the CIT (A)'s decision to estimate the income at 3% of the turnover, considering the nature of the entries provided by the appellant and prevailing trade practices. The appellant's argument based on the estimation in the succeeding years was rejected, as the business nature differed. The appeal was dismissed, affirming the CIT (A)'s order.